For Gen Z, Banking Loyalty Begins with Payments

Banking relationships often start earlier than most people realize—and they tend to last longer than expected. Roughly half of young consumers will stick with their bank into adulthood, and many never switch.

This puts banks’ focus squarely on Gen Z, where the youngest members of the cohort are in their early teenage years and the oldest are already facing significant financial decisions. Still, many financial institutions have struggled to connect with this digital-first demographic.

In a recent PaymentsJournal podcast, Fiserv’s Tina Shirley, VP of Product Management and Josh Mesaros, Inside Sales Executive, as well as Ben Danner, Senior Debit Analyst at Javelin Strategy & Research, discussed payments experiences across generational lines and the areas where banks fall short.

What they uncovered was that when financial institutions improve payment experiences to better engage Gen Z, they also positively impact consumers across the board.

The Gamut of Mobile Banking Experiences

For most consumers, the best mobile experience isn’t the flashiest one—it’s the one that works seamlessly every time.

While many banks focus on creating sleek new user interfaces, customers’ highest expectation for online and mobile banking apps is simply that they work—especially for everyday interactions like viewing checking account balances and reviewing credit card transactions.

Over the years, many of these features have become taken for granted, but they represent a significant improvement over are far superior to the alternative.

“I think back to when online bill pay was new for me, it was kind of a life-changing offering,” Shirley said. “Rather than writing a check and having to go get stamps and remember to mail a check, moving to online bill pay changed my routine from being annoying and inconvenient to just a couple of clicks to pay my bill.”

Although many mobile banking activities have become ingrained behaviors, new technologies have driven significant shifts in other areas. This is especially true for Gen Z and millennial consumers.

“The biggest one for me would be Zelle®,” Mesanos said. “I live with a bunch of buddies and every month I have my payment set and scheduled where on the first of the month I pay my roommate, who then pays all of our rent to our landlord at once. It is also very convenient when going out to dinner and for my yearly dues to my hockey team. Zelle®'s just a must have for me.”

The Fragmentation of Financial Apps

Although Zelle® is a powerful tool, there is no monopoly in fintech—a reality that underscores one of the biggest challenges facing banks and credit unions as they compete for relevance among Gen Z.

The market is now crowded with digitally native fintechs and neobanks, many of which have made early inroads with users.

While many of the companies were created to addresses specific banking niches, several fintechs have since expanded their offerings to rival traditional banks. Companies like Venmo and Cash App can accept deposits, facilitate investments, and issue debit cards.

However, while these services may be bank-like, they are not equivalent to full-service banking offerings.

“Some of these third-party payment platforms—for example, Venmo—are not insured,” Mesanos said. “I once had a buddy in college that had a bunch of money sitting in his Venmo account because he didn't want his parents to access that and see how much he had. But that not being insured scares me because you never know what's going to happen.”

Another issue with fintechs is that many operate as walled gardens, where users must join a platform to participate in its ecosystem. To accommodate these varied scenarios, customers often download multiple apps. This can quickly lead to financial fragmentation, where users hold balances across several platforms with no holistic way to manage them.

“You might have a Gen Z customer bouncing around between all these different fintech apps and multiple banking apps, to the point wh